Analysts have been making predications about which mobile operating system platform will end up on top and Nielsen has been tracking market share trends. But what do venture capitalists think about all this? A recent post on Thomson Reuters's peHUB offers a few key insights.The smartphone battle, as everyone knows, is raging these days.
Private Equity Hub, for those unaware, is a forum for the global private equity community, including venture capitalists, buyouts professionals, public pension funds, endowments, foundations, lenders, investment bankers, attorneys, entrepreneurs and others.
Via a blog post from peHUB's Connie Loizos, we're given a brief glimpse into what some of the top VCs investing in mobile think about the platform wars. The comments were insightful, and we thought worth sharing. You can read them in their entirety on peHUB, of course.
- Dana Stalder, General Partner, Matrix Partners
Related investments: free text messaging startup GOGII, mobile payment service provider Zong:
Stalder says the iPhone "changed everything from an innovation standpoint," but now Google is "really creating the alternative to the iPhone platform, and they're doing it in a very real way.
"Venture investors have been looking at a whole slew of mobile companies that have emerged over the last couple of years to build applications for the iPhone platform. But [now] every single one of those companies is doing development for Android, too, or figuring out when they'll start development on the Android platform. The iPhone still has the larger installed base, so anyone new is probably starting with the Apple platform then looking at Android as an obvious extension of that platform. But I think that will change as the installed base shifts in time. If I had to guess, I'd say that will happen about two years out. Then, app developers will have a real decision to make-out of the gate-about whether they start with Apple or Android or both."
- John Albright, Founder and Managing Partner, JLA Ventures
and Co-Managing Partner, BlackBerry Partners Fund
Related investments: mobile advertising startup Nexage, mobile content distribution startup PocketGear
"On a macro basis, we want to invest in mobile companies that address all the major platforms in the marketplace, so it's Apple, BlackBerry and Android.
For a commerce platform, we'd push [a startup] to write to BlackBerry or Apple. I'd say you have to have both of them covered. The Android platform and the devices out there have a poor commerce solution. You have to go through Google checkout and to do that you have to register with Google and most users aren't registered. So if your solution is dependent on or driving commerce, don't do it for Android.
Also, if the application is material to users, if they're going to care about privacy, then I'd say again that Android is inferior to BlackBerry and Apple because it's an open platform, and there are pros and cons to open platforms. On the one hand, it's nice because anyone can write an app to it and Google doesn't really say whether it's good or bad, [unlike] when you're dealing with Apple and Blackberry, where apps have to be cleared. [That could] result in thousands of developers dedicated to the [Android] platform. But you might get lower quality developers because they don't have to clear any quality or security hurdles. It's also a lot easier for hackers to get in to Android [because of its open platform]."
Albright also shared some concerns about the fragmentation of the Android ecosystem, saying it could become a real headache.
- Rich Wong, Partner, Accel Partners
Related investments: mobile app store GetJar, mobile advertising startup AdMob (acquired for Google)
Wong was more excited about Android than Albright, saying:
"Android will be massively important over the next five to seven years of mobile startup investing. You can see it in terms of the pressure that's being put upon Nokia and RIM. You see it in terms of Motorola, whose dominant Android strategy suddenly has it doing well again. So I think it's an incredible wave, and I think we'll see a lot of incredible companies around the Android ecosystem.
From an investor point of view, there are certain challenges to building a big breakout company if you're operating a closed ecosystem. If you're iPhone only, it's hard to know how Apple might change the rules in one to five years. If you're building your app on iPhone only, it's organized to their credit, but they make all the rules. In some ways, because Android is less tightly controlled, it requires more thought to [develop the] business model to make it successful. But because it's open, there's more potential to build a big startup business.
[John Albright makes] valid points but exactly those points are the business opportunities. [If you need] a better security framework for enterprise apps, you build a company around mobile security perhaps. So these gaps, these business challenges, are in and of themselves business opportunities."
Wong also notes that Android's current issues involve app discoverability, payment models and security issues. But concludes that there are still great opportunities for developers on Android.